Erdoğan accuses USA of “attempted economic coup”
Liam Sheasby, News Editor
20 Aug 2018, 11:33 a.m.
President Recep Tayyip Erdoğan of Turkey has accused the United States of an “attempted economic coup” after America imposed economic sanctions against the Middle East nation.
The US introduced global economic tariffs on certain goods but has doubled these rates for Turkey, specifically targeting aluminium and steel. The move is retaliation for Turkey refusing to release Andrew Craig Brunson; an American Pastor who is accused of espionage and related terror offences.
Turkey has responded by introducing tariffs of its own against US cars, rice, beauty products, and spirits, but these penalties are nothing compared to the 38% drop in value of the Lira against the US dollar that has been suffered since the start of 2018.
In a speech to supporters in Ankara, President Erdoğan said: “Today some people are trying to threaten us through the economy, through interest rates, foreign exchange, investment and inflation.
“We are telling them: we’ve seen your games, and we are challenging you. We did not and will not surrender to those who act like a strategic partner but make us a strategic target.”
As a result of the Lira’s fragility, two of the three biggest credit-rating agencies in the US – Standard & Poor’s and Moody’s – downgraded Turkey’s credit rating on Friday. Turkey now sits just above “junk” status, with analysts worried about continued losses for the nation’s currency, as well as having concerns over the central bank’s independence after an interest rate rise was vetoed by President Erdogan.
A spokesperson on behalf of Standard & Poor said: “The downgrade reflects our expectation that the extreme volatility of the Turkish Lira and the resulting projected sharp balance of payments adjustment will undermine Turkey's economy. We forecast a recession next year.”
Despite fears of rapid inflation and recession, Turkey is actively fighting back, with Qatar investing $15 billion into the country to help stabilise the currency and the Central Bank changing investor rules to avoid ‘shorting’. This practice is when an investor borrows shares, sells immediately, and then buys them back at a cheaper price later on in order to pocket the difference, all before returning the shares to the owner. The collapse of the Turkish Lira has seen many investors jump on board, only to then ‘short’ the currency in order to benefit from its decline further down the line.
#EURTRY: Turkish Regulator Halves Limit for Banks' Swap Transactions.— Martin Enlund 🦆🚁 (@enlundm) August 15, 2018
Good for $TRY as it limits the room for investors to short TRY, but bad for Turkey asset prices (more costly to hedge TRY risk) pic.twitter.com/HbQdw2kr6v
As a result of the declining Lira, many Turks have been turning to gold to protect their savings until the Lira returns to normality – something President Erdoğan has instructed the public not to do in order to keep as much money in circulation as possible.